HMRC: VPaaS contract award

UK-Salford: Application service providers.

Section I: Contracting Authority

   I.1) Name, Addresses and Contact Point(s):
       HMRC
       5W Ralli Quays, Salford, M60 9LA, United Kingdom
       Tel. +44 3000532848, Email: liam.osborn@hmrc.gov.uk
       Contact: Liam Osborn
       Main Address: www.gov.uk
       NUTS Code: UK

   I.2) Joint procurement:
      The contract involves joint procurement: No          
      In the case of joint procurement involving different countries, state applicable national procurement law: Not Provided
      The contract is awarded by a central purchasing body: Yes

   I.4)Type of the contracting authority:
      Ministry or any other national or federal authority, including their regional or local subdivisions

   I.5) Main activity:
      Other activity: Direct and indirect taxation

Section II: Object Of The Contract

   II.1) Scope of the procurement

      II.1.1) Title: VPaaS contract award            
      Reference number: SR283799478

      II.1.2) Main CPV code:
         72416000 - Application service providers.


      II.1.3) Type of contract: SERVICES

      II.1.4) Short description: The contract is for continuation of hosting provision for 13 HMRC applications on Virtual Managed Environment (VME) Platform, on which they are currently hosted. The contract includes option for potential provision of modernisation and application services for the hosted applications, which will be either decommissioned or transitioned from the VME (and later the upgraded MVE) platform during the life span of this contract.

      II.1.6) Information about lots
         This contract is divided into lots: No
            
      II.1.7) Total value of the procurement (excluding VAT)
          Value: 168,800,000
                  
         Currency:GBP            

   II.2) Description

      II.2.2) Additional CPV code(s):
            72212000 - Programming services of application software.
            30211300 - Computer platforms.


      II.2.3) Place of performance
      Nuts code:
      UK - UNITED KINGDOM
   
      Main site or place of performance:
      UNITED KINGDOM
             

      II.2.4) Description of the procurement: HMRC has awarded a contract to Fujitsu to provide VME platform and support services for business critical legacy HMRC applications utilising Fujitsu’s proprietary virtual machine environment system (“New Contract”).
Prior to this Fujitsu was the incumbent service provider to HMRC under two contracts; one covered the support of the Customs Handling of Import and Export Freight (“CHIEF”) application and expires on 31 March 2021 (“CHIEF Contract”); and the other covered (amongst other things) support of the other HMRC applications listed below (and other applications no longer supported). This expires in June 2022 (“Prime Contract”). The CHIEF Contract and the equivalent services under the Prime Contract shall terminate when the New Contract takes full effect.

The services under the New Contract are: the provision of a VME platform service for the applications below using the proprietary VME operating systems; related management and storage ancillary services; and optional application modernisation and application services related to the applications which HMRC can call off on a non-exclusive basis.

The maximum term of the New Contract is 5 years (partly overlaps with the unexpired terms of the Prime Contract and CHIEF Contract) with no extension rights. As HMRC’s programme to decommission and deploy replacement applications which are hosted in more modern environments is rolled out on a phased basis (“Programme”), consumption of the services supporting the legacy applications under the New Contract will decrease steadily from December 2022 in line with that Programme. The Programme is scheduled to complete by the end of the term of the New Contract with CHIEF and CESA being the last applications to be decommissioned by 2025.

The applications supported by the New Contract are:
CHIEF: which is critical national infrastructure (“CNI”) and the related Consolidated Tariff System application;
VAT: applications known as Valid, Vision, VAT Batch, VAT, which are also CNI;
Computerised environment for self -assessment;
C&IT Non VAT Accounting: five applications (Local Data Capture Service, Payable Order Optimisation Project, Vat Certificates, Warehousing, Duty Deferment);
Trade Statistics: generates payments figures for imports/exports;
VAT Information Exchange Services: handles transfers of VAT information between EU countries; and
OAS/IRIS/ BROCS: respectively deal with accounting summaries, customer overpayments and managing tax.

The New Contract value is £168.8m (49% for services connected to CHIEF and 51% to the rest).
Payments are supported by service levels and service credits and are structured as a combination of: platform services based on a fixed volume consumption charges, with additional transaction charges over a threshold; related volume-based storage charges; and rate-card based charges for projects including applications modernisation and application services.

The need for the New Contract has arisen from delays to the Programme (including uncertainty regarding the impact of the EU Exit final deal on the future, volume and operation of some applications).Therefore support for legacy applications is required, beyond the term anticipated by the CHIEF Contract and the Prime Contract. As these are key applications (some CNI) HMRC requires the secure and uninterrupted delivery of support to those applications and considers the award of the New Contract to be the best option for securing delivery of those services until 2025, when it expects to have fully completed the Programme.
This is an award of a contract via the negotiated procedure without prior publication under Article 32 of Directive 2014/24/EU. HMRC’s view, having taken advice, is reliance on Article 32 is justified because services being procured under and for the term of the New Contract can only be provided by Fujitsu because competition is absent for technical reasons.

      II.2.5) Award criteria:
      Quality criterion - Name: Direct award / Weighting: 100
                  
      Cost criterion - Name: No cost - direct award / Weighting: 0
            

      II.2.11) Information about options
         Options: No
         

      II.2.13) Information about European Union funds
         The procurement is related to a project and/or programme financed by European Union funds: No
         

      II.2.14) Additional information: Not Provided


Section IV: Procedure

IV.1) Description

   IV.1.1)Type of procedure: Award of a contract without prior publication of a call for competition in the Official Journal of the European Union in the cases listed below (please complete Annex D1)


   IV.1.3) Information about a framework agreement or a dynamic purchasing system
      The procurement involves the establishment of a framework agreement: No       
      

   IV.1.6) Information about electronic auction
      An electronic auction has been used: No

   IV.1.8) Information about the Government Procurement Agreement (GPA)
      The procurement is covered by the Government Procurement Agreement: Yes

IV.2) Administrative information

   IV.2.1) Previous publication concerning this procedure
       Not Provided
   

   IV.2.9) Information about termination of call for competition in the form of a prior information notice
      The contracting authority will not award any further contracts based on the above prior information notice: No

Section V: Award of contract

Award Of Contract (No.1)

   Contract No: Not Provided    
   Lot Number: Not Provided    
   Title: Not Provided

   A contract/lot is awarded: Yes


   V.2) Award of contract

      V.2.1) Date of conclusion of the contract: 30/09/2020

      V.2.2) Information about tenders
         Number of tenders received: 1
         Number of tenders received from SMEs: Not Provided          
         Number of tenders received from tenderers from other EU Member States: Not Provided          
         Number of tenders received from tenderers from non-EU Member States: Not Provided          
         Number of tenders received by electronic means: Not Provided

      V.2.3) Name and address of the contractor

      The contract has been awarded to a group of economic operators: No
         
         Contractor (No.1)
             Fujitsu Limited, BR012706
             22 Baker Street, London, W1U 3BW, United Kingdom
             NUTS Code: UK
            The contractor is an SME: No

      V.2.4) Information on value of the contract/lot (excluding VAT)
         Initial estimated total value of the contract/lot: 168,800,000          
         Total value of the contract/lot: 168,800,000
         Currency: GBP

      V.2.5) Information about subcontracting
         The contract is likely to be subcontracted: No
         
Section VI: Complementary information

   VI.3) Additional information: To view this notice, please click here:
https://www.delta-esourcing.com/delta/viewNotice.html?noticeId=528928893

   VI.4) Procedures for review

      VI.4.1) Review body
          HMRC
          5W Ralli Quays, Salford, M60 9LA, United Kingdom

      VI.4.2) Body responsible for mediation procedures
          HMRC
          5W Ralli Quays, Salford, M60 9LA, United Kingdom

      VI.4.3) Review procedure
         Precise information on deadline(s) for review procedures: Not Provided

      VI.4.4) Service from which information about the review procedure may be obtained
         Not Provided

   VI.5) Date of dispatch of this notice: 07/10/2020




ANNEX D

   1. Justification for the choice of the negotiated procedure without prior publication of a call for competition in accordance with Article 32 of Directive 2014/24/EU

      No tenders or no suitable tenders/requests to participate in response to: Not Provided

            
      
      The works, supplies or services can be provided only by a particular economic operator for the following reason: absence of competition for technical reasons

      Extreme urgency brought about by events unforeseeable for the contracting authority and in accordance with the strict conditions stated in the directive: No

      Additional deliveries by the original supplier ordered under the strict conditions stated in the directive: No

      New works/services, constituting a repetition of existing works/services and ordered in accordance with the strict conditions stated in the directive: No
            Service contract to be awarded to the winner or one of winners under the rules of a design contest: No
      

      Purchase of supplies or services on particularly advantageous terms: No


   3. Explanation
          The services required by HMRC consist of the provision of hosting platform and related services on a run off basis until 2025 to support business critical legacy HMRC applications, whilst HMRC completes the roll out of its delayed application transition and decommissioning Programme. The applications generate substantial taxes and revenue for the UK and a number of key applications are also CNI, which must be wholly reliable. It is therefore imperative that the support of such applications continue to be delivered safely and without interruption.

The award of the New Contract to Fujitsu ensures the secure and continued support of the legacy applications on a reducing basis whilst the applications are transitioned/decommissioned over the next 5 years. The VME hosting platform is proprietary to Fujitsu and so VME based services are technically only available from Fujitsu and are not available in the market from alternative third-party service providers.

HMRC’s assessment is that there is no alternative that would technically be capable of being successfully deployed before HMRC’s requirements for the run off services come to an end. The VME solution has been in place with HMRC for over 30 years and so is heavily integrated with the legacy applications being supported. Due to this and the complex functionality and significant nature of the applications, the extensive testing required (particularly in respect of those applications which are CNI) and the lengthy transition periods needed given the volume of users of the applications, no alternative solution would realistically be ready for use before HMRC’s requirement for the run off services came to an end.

To add further context as to why there is no reasonable alternative, VME would also still have been required throughout and to develop an immediately redundant solution would make no economic sense.

Accordingly, HMRC concluded that for technical reasons HMRC was procuring services under the New Contract which only Fujitsu could provide and for which there was no reasonable alternative.